Alimentation Couche-Tard, the owner of Circle K, is pursuing a takeover of Seven & i Holdings, the Japanese parent company of 7-Eleven. This potential merger would create a global convenience store giant.
The deal is significant, potentially marking the largest foreign takeover of a Japanese company in history
Couche-Tard scraps $47 billion bid for Japan's Seven & i
By Reuters
TOKYO, July 17 (Reuters) - Canadian retailer Alimentation Couche-Tard (ATD.
on Thursday pulled its $47 billion bid to buy Seven & i Holdings (3382.T)The
surprise move ends what could have been the largest foreign takeover of
a Japanese company as Circle K operator Couche-Tard sought to create a
global convenience store giant by acquiring the company behind 7-Eleven.
"There
has been no sincere or constructive engagement from 7&i that would
facilitate the advancement of any proposal, contrary to comments made
publicly by 7&i representatives," Couche-Tard said in a letter to
its board of directors.
"Rather,
you have engaged in a calculated campaign of obfuscation and delay, to
the great detriment of 7&i and its shareholders," the letter said.
Seven
& i said in a statement that "while we are disappointed by ACT's
decision, and disagree with their numerous mischaracterizations, we are
not surprised."
Seven
& i is widely seen as a test case for corporate Japan's openness to
foreign takeovers. The withdrawal came after Nippon Steel (5401.T)
was able to acquire U.S. Steel in a contentious $14.9 billion transaction.Seven & i shares fell 9% in morning trading in Tokyo.
"We
are very disappointed in what appears to be a lack of willingness to
engage from Seven & i," said Manoj Jain, co-founder and co-CIO of
Hong Kong-based Maso Capital.
"We
believe there is significant value to be realised in a combination and
have expressed this view to the management and the board."
Couche-Tard raised its offer to about $47 billion last year and in March offered to increase it further if the Japanese firm cooperated and revealed more financial information.
It was also working with Seven & I on a store sale plan, in a bid to ease some regulatory hurdles.
Couche-Tard's
approach appeared to be gathering steam after a white-knight bid from
Seven & i's founding Ito family ended after failing to get
financing.
ALTERNATIVE PROPOSALS
Couche-Tard
said it believed a full combination of the two companies would maximise
value for shareholders but had also explored alternatives.
The
retailer said it had proposed acquiring all of 7&i's business
outside of Japan and 40% of the business in Japan, where convenience
stores are seen as key infrastructure due to their support role during
natural disasters.
"We
are not able to effectively pursue this combination without deeper and
genuine further engagement from 7&i leadership and the special
committee," the letter said.
Seven
& i proposed selling its international business to Couche-Tard in
return for a stake in the Canadian retailer, the letter said.
Such
a deal "would not deliver the significant premium that was offered to
your shareholders in our transaction proposals," the letter said.
Seven
& i, whose first foreign CEO Stephen Dacus took the role in May,
has been under intense pressure to improve its lacklustre earnings and
demonstrate it can grow independently.
"We remain fully committed to our standalone value creation plan, which we have been pursing in parallel," said Seven & i.
The
retailer has announced a share buyback, is selling off non-core assets
and plans to list its North American convenience store business.
"It
shows you can drag out the process to avoid being bought out," said an
investor in Seven & i, who spoke on condition of anonymity.
Given how long Couche-Tard's process has taken I can't see anyone else coming in with a bid," the investor added.
Reporting by Anton Bridge in Tokyo, Kane Wu in Hong Kong and Savyata Mishra in Bengaluru; Writing by Sam Nussey; Editing by Shailesh Kuber and Sonali Paul
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